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ABC Special Report
Investigation: New Home Heartbreak
Trump - NAHB Homebuilders Shoddy Construction and Forced Arbitration
Big Money and Shoddy Construction
Tuesday, 11 October 2005

Joint Press Conference held by Campaigns for People and HomeOwners for Better Building, January 24, 2005
Related Articles: Texas Monthly - Home Buyer Beware 
Texas Observer - The Agency that Bob Perry Built

Big Money and Shoddy Construction:
Texas Home Buyers Left Out in the Cold

Texans care deeply about their homes. Their homes are central to their family life and one of their most valuable investments. Nevertheless, at the behest of homebuilders and with little public debate, the Texas Legislature passed in 2003 the Texas Residential Construction Commission Act (TRCCA), which strips Texas homeowners of most of their rights against homebuilders for shoddy construction.

The law is incredibly one-sided for homebuilders and against legislators’ home-owning constituents. Perhaps not coincidentally, homebuilders contributed over the last 4 years to Texas state officeholders and candidates nearly $9 million in identified contributions.

To ensure Texas homeowners are heard and their rights respected at the Capitol, Texas should pass reasonable aggregate and individual contribution limits and tighten its corporate and union prohibition on contributions. Texas also should establish an effective and independent campaign finance enforcement agency to enforce these laws.

I. Homebuilders Have Contributed $9 Million Since 2001

Homebuilders in Texas gave at least $8,985,619 in identifiable contributions to state candidates, parties, and PACs over the last four years.i In the 2004 election cycle (not including contributions made on or after election day), the homebuilders’ PACs and executives gave $3,976,086 to state executive and legislative candidates, political parties and PACs. See Appendix A & B. The ever-generous Bob Perry of Perry Homes leads the way with $3,177,250. The state’s leadership (the Governor, Lt. Governor, and Speaker) received $528,901 from the industry and the members of the applicable committees (House Regulated Industries and Senate Business & Commerce) received $93,750. See Appendix A & B.

In the 2002 election cycle, homebuilder identified contributions to candidates for state executive and legislative office totaled over $5,009,532 with Bob Perry again leading the way at $3,720,000. As a group, homebuilders in this period contributed $574,267 to the state’s leadership and $144,700 to the pertinent committee members, who approved the TRCCA in the 2003 session. See Appendix A & B.

Homebuilder Contributions January 1, 2001 to November 1, 2004
To state candidates and PAC's: $8,985,619
To Leadership: $1,009,162
Homebuilders Have Contributed $9 Million Since 2001

II. 2003 Legislature Passes TRCCA, Gutting Homeowners’ Rights

The 2003 Legislature overwhelmingly passed--with little media or public attention-- House Bill 730, the TRCCA. This complex law establishes the Texas Residential Construction Commission (TRCC) to register homebuilders, sets up a mandatory state dispute resolution process, and imposes a state mandated limited warranty for home construction.ii The Governor appointed the TRCC’s commissioners, most of whom have ties to the homebuilding or construction industry.iii

This one-sided law harms Texas homeowners in two principal ways.iv First, the TRCCA eliminates crucial homeowners’ rights against homebuilders and replaces them with a very limited state-mandated warranty. Second, the law establishes a very lengthy and bureaucratic process that homeowners must go through before they can seek redress through the courts or arbitration. The law ensures that homeowners will have little leverage to get shoddy construction fixed, that homeowners will lose the vast majority of their disputes, and that the process will result in long delays in homeowners receiving redress.

A. Stripping Homeowners’ Rights

The TRCCA eliminates the common law implied warranty of good and workman-like construction and severely limits the availability of the Texas Deceptive Trade Practices Act (DTPA).v It replaces these crucial consumer rights with a very limited state-mandated warranty.

Texas courts created the implied warranty of good and workman-like construction so that homebuilders and contractors would be required by law to provide good and workmanlike services to every Texas homeowner.vi Just as Texas law requires all lawyers, doctors, architects, and other professionals to provide reasonable quality services, the courts required through the implied warranty that homebuilders and contractors provide Texans reasonable-quality construction services. In addition the DTPA had protected Texas homeowners since 1973 from unconscionable conduct and contractor misrepresentations by homebuilders, as it has done for all other providers.

The TRCCA eliminates the implied warranty of good and workman-like construction and severely limits the DTPA replacing them with a state-mandated warranty with very limited protections. The law imposes a state limited warranty that applies to all new home and renovations of $20,000 and greater. Although the homebuyer may expressly contract with the homebuilder for more comprehensive rights, this will rarely happen since few homebuyers have the legal sophistication or wherewithal.vii

By statute, the TRCCA’s warranty limits coverage to one year for workmanship and materials, two years for plumbing, electrical and HVAC (heating/venting/air conditioning), and ten years for major structural components.viii The warranty period runs from the date the homeowner takes title or moves in, whichever is earlier.ix TRCCA, in short, abolishes the common law discovery rule (which allowed homeowners to discover defects even after the warranty period). Today hidden defects undetected within the warranty period are not the builder’s responsibility. If the homebuilder, for instance, installs the plumbing, electrical wiring or air-conditioning poorly (of which the homeowner has no knowledge) and these essential components fail after 2 years, the homeowner is left with a long mortgage, poor construction, and no recourse. Similarly, if the foundation crumbles completely after ten years, no matter how poorly the homebuilders’ work and no matter how worthless the house, the homeowner has no recourse.

The Texas Residential Construction Commission (TRCC) adopted on January 12, 2005 lengthy regulations delineating particulars of the limited state warranty.x A number of critics believe these regulations provide little protection to homeowners and are primarily for the protection of homebuilders and contractors. According to a San Antonio Express News article, Jay Robbins, a real estate broker with Prudential Don John son Co., stated that the state standards “have too many loopholes, too many ways for the builders to circumvent their responsibility… The buyer’s leverage goes away at closing.” San Antonio home inspector Mark Eberwine similarly concluded in the article that the TRCCA regulations are “more of a pre-emptive strike on complaining homeowners than it is a warranty.” And Ware Wendell, of Texas Watch was even more blunt: “ Texas homebuilding standards should be set high. The bar shouldn’t be lowered. It isn’t fair to Texas homeowners… It isn’t fair to good builders who have to compete with companies that cut corners.”xi

In short, the Commission appears to have promulgated warranty regulations for the homebuilders, by the homebuilders, and of the homebuilders--and against Texas homeowners.

B. Imposing A Mandatory Bureaucratic Dispute Resolution Process

TRCCA forces a homeowner to file and pursue their complaint through the Commission even if the homeowner wants to directly pursue legal action against their homebuilder through the courts or arbitration. This “State Inspection and Dispute Resolution Process” (SIRP) adds unnecessary and complicated bureaucratic layers to settling construction disputes. It can take up to three months for the agency to consider and decide a complaint for workmanship and materials and up to months for structural problems--before the homeowner can get into court or arbitration.xii The required TRCCA steps include:

  • at least 30 days for giving the homebuilder notice prior to a complaint
  • time for the homeowner to compile and file their complaint
  • TRCC determines eligibility
  • up to 5 days for the commission to appoint an inspector
  • up to 15 days for the inspector to inspect, draft, and transmit a report on a non-structural complaint and up to 50 days for a structural complaint
  • up to 15 days for either party to appeal the inspector’s report
  • up to 25 days for the appellate panel to make a decision and 3 days for transmittalxiii

    The statutory process can take an additional 3 months for the parties to reach an agreement on repairs and have them made:

  • up to 15 days for the builder to offer to settle

  • up to 25 days for homeowner to notify builder if an offer is unreasonable.

  • up to 10 days after homeowner’s notice of an unreasonable offer, the builder may supplement their offer

  • up to 45 days for the builder to make repairs after the homeowner accepts the new offer
  • up to 15 days for builder to make additional minor or cosmetic correctionsxiv

In addition, the state forces the taxpayer to pay the Commission for the privilege of filing a complaint. The cost is $350 - $650, which is in addition to the regular cost of filing suit if the homeowner is not satisfied at the end of the SIRP. The homeowner also must, as part of the discovery process, provide the state agency with all evidence that they have against their builder. Prudent homeowners, therefore, will have to hire their own expert because they will need expert testimony to contest an inaccurate state inspector’s report.

Their builder, however, is not required to give up any discovery that may hurt the builder’s case in any subsequent legal proceedings. So, in essence the homeowner is actually being made to pay for the builder’s discovery process.

Another TRCCA provision states that the Commission inspector who inspects the property is precluded from notifying the homeowners of any construction defects they discover that the homeowner has not specifically complained about. This provision will surely save the homebuilders money, but at the expense of homebuyers’ safety and protection.xv


In the past 25 years there has been a remarkable erosion of rights for Texas homeowners. Why? Because there has been an extremely effective, well-funded lobby working the Texas Legislature and too few consumer advocates fighting the flood of change. Money talks. -Mark McQuality, Attorney

III. Reforms So Legislators Hear Texas Homeowners

A. Reasonable Aggregate and Individual Contribution Limits. The vast majority of states and the federal government limit individual and PAC contributions. There are, however, no contribution limits in Texas legislative and executive state elections. Bob Perry and other homebuilders have given hundreds of thousands of dollars to just one candidate. Texas should place a limit on how much one individual or PAC can give to any particular candidate.

In addition, Texas needs an aggregate limit that restricts how much one person can contribute cumulatively to all state candidates, PACs, and parties. There is no reason one person should be able to contribute more than $25,000 a year--which is what an average Texans earns annually-- much less $3 million.

B. Tighten the Corporate and Union Prohibition. Currently, we don’t know who funds sham issue ads that have proliferated recently in our elections. To ensure homebuilding and construction corporations, among others, donít fund sham issue ads intended to influence elections, Texas needs to adopt a bright line test to prevent corporate and union contributions, and require individual donor disclosure, of broadcast and direct mail ads that refer to a candidate and target their district with 60 days before a general election. The federal government closed this backdoor loophole for corporations, unions, and rich individuals. Texas should do likewise.

Only in Texas can a builder donate $7 million to state officials, get his Senior Vice-President and Corporate Council appointed to the Residential Construction Commission, and then claim money has no influence in politics. - John Cobarruvias, Homeowners Against Deficient Dwellings


IV. Conclusion

Texas ’ fundamentally flawed campaign finance system must be fixed before Texas homeowners’ voices will be heard at the Capitol. Just as you cannot build a house on a flawed foundation, you cannot build good government on unlimited campaign contributions and undue special interest influence.

Methodology

Contribution numbers exclude contributions to judicial candidates, state ballot propositions, and railroad commission candidates. Homebuilders were identified by Texans for Public Justice in “Money in Politex” (2003) and do not include unidentifiable homebuilder contributions. All contribution data comes from the Texas Ethics Commission.

Contact Brian Donovan at brian@campaignsforpeople.org or call 512-472-1007 for a copy of detailed contribution spreadsheets on CD or via email.

i Donation data are from the Texas Ethics Commission including all donations from Jan 1, 2001 to Oct 25, 2004 . Homebuilders identified from ìMoney in Politexî. Texans for Public Justice, November 2003.

ii Texas Property Code, Title 16, Chapters 401 et. seq.
iii “Who We Are” Texas Residential Construction Commission Website. http://www.trcc.state.tx.us/who_we_are/who_we_are_index.asp
iv See Texas Property Code, Sections 430.001,430.006, 426.001 et. seq. (Vernon 2004)
v Texas Property Code Section 430.006 (Vernon 2004)
vi “The New Texas Residential Construction Commission Act and the Amended Residential Construction Liability Act: What You Need to Know” Mark McQuality, Bragg, Chumlea, McQuality, for Texas Bar Continuing Legal Education (2004)
vii Texas Property Code Section 430.001 (b) (Vernon 2004)
viii Id. , Section 430.001 (f)
ix Texas Administrative Code, Chapter 304 (Adopted January 13, 2004 ) available at http://www.trcc.state.tx.us/Rules/adopted_rules.htm
x “Building Rules are Hammered, Proposed Standards called Bad for Homeowners and Reputable Companies” by Adolfo Pesquera, San Antonio Express News, January 11, 2005
xi State Sponsored Dispute Resolution Process (SIRP) Adopted Rules. Texas Residential Construction Commission Website. http://www.trcc.state.tx.us/Complaints_SIRP/complaint_sirp_index.htm
xii Id.
xiii Id.
xiv Id.
xv Id.
Appendix A

Total Homebuilder Contributions to Candidates, parties and PACs: $8,985,619
Top 5 Contributors from the Homebuilding Industry 2001-2004

Bob Perry, Perry Homes                        $6,897,250
Doylene Perry, Perry Homes                   $ 565,000
Woody L Hunt, Hunt Construction            $ 308,935
David Weekley, Weekley Homes             $ 189,500
Frank McGuyer                                         $ 175,000

Homebuilder Contributions to Leadership and Committee Members 2001-2004

Governor Rick Perry                                $744,562
Lt. Governor David Dewhurst                  $294,100
Speaker Tom Craddick                             $ 60,500

Homebuilder Contributions to Senate Business & Commerce Committee 78th Legislature

Senator Troy Fraser, Chair                    $ 12,750
Senator Kip Averitt, Vice Chair              $ 32,500
Senator Ken Armbrister                         $ 10,000
Senator Kim Brimer                                $ 16,000
Senator John Carona                              $ 10,000
Senator Craig Estes                                $ 36,700
Senator Mike Jackson                             $ 0
Senator Eddie Lucio, Jr.                          $ 14,500
Senator Leticia Van de Putte                  $   6,000

Homebuilder Contributions to House Regulated Businesses Committee 78th Legislature

Representative Phil King, Chair             $ 28,000
Representative Bob Hunter, Vice Chair $      500
Representative Sylvester Turner          $ 24,500
Representative Steve Wolens                $ 2,000
Representative Todd Baxter                  $ 41,500
Representative Joe Crabb                      $ 3,500
Representative Ryan Guillen                  $ 0

 
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